Euler Protocol DeFi Attack: Detailed Analysis, Reproduction, and Risk Assessment

The article begins by introducing the growing importance of smart‑contract security in blockchain applications and explains that this is the first part of a series on Euler Protocol smart‑contract vulnerabilities.

It recounts the March 13, 2023 Euler attack, which involved six transactions that drained approximately $197 million USD from multiple pools (DAI, WBTC, stETH, USDC). The attacker later returned about 86% of the assets after negotiations.

Background information describes Euler as an unpermissioned lending protocol, its eToken/dToken model, and the specific modules (Mint, Donate) that were exploited.

Attack analysis details the identical steps across all transactions, including flash‑loan borrowing, depositing, minting large amounts of debt, partial repayment, additional minting, donating to reserves (the vulnerable function), and finally liquidating the under‑collateralized vaults. Tables list transaction hashes, assets, and stolen amounts.

The core vulnerability is the donateToReserves() function, which does not verify the health of the vault after a donation, allowing the attacker to lower the collateral ratio below 1 and trigger highly profitable liquidations.

Subsequent sections discuss how the attacker calculated liquidation profit using checkLiquidation() , the maximum discount (20%), and the need for the liquidation profit to exceed flash‑loan fees.

To validate the findings, the authors set up a Ganache fork of Ethereum at block 16817995, deployed an attack contract, and reproduced the drain of the DAI and USDC pools, confirming the exploit works and measuring gas costs.

Further risk modeling explores alternative attack paths, showing that varying the ratios of flash‑loan amount, mint amount, and donate amount can still satisfy the profitability inequality (0.95*flash + 0.95*mint - donate)*0.2 >> target + flash . Simulations indicate that even smaller, stealthy attacks could turn Euler into a long‑term “withdrawal machine”.

Finally, the article summarizes that the lack of post‑donation health checks allowed the attacker to empty five major pools, stresses the importance of fixing this vulnerability, and notes that the attacker’s partial restitution mitigated user losses.

Throughout the article, code snippets are presented unchanged within ... tags, and data tables are retained to preserve technical detail.